The U.S. Department of Justice's Trustee Program is expected to promulgate new disclosure rules this month for law firms regarding the fees they charge debtors in Chapter 11 bankruptcy cases.
Professional fees in these cases have ballooned in recent years, leaving many creditors wondering how debtors' attorneys can bill such exorbitant costs to firms that are already in financial straits. Among the rules expected to be proposed by the Trustee Program are provisions that would require firms to disclose rate increases and justify them as cases go on, as well as measures that require firms to prove that their rates are aligned with other members of their industry.
The actual debtor's cost for a Chapter 11 bankruptcy filing has long been criticized but was thrown into the public eye in the wake of the liquidation of Lehman Brothers. Court filings in March of this year revealed that the holding company paid a whopping $1.6 billion to lawyers, accountants, advisers and other professionals over the course of their case.